Finding a move-in-ready house in a great neighborhood can be expensive. But if you use a Federal Housing Administration (FHA) loan for your home improvements, you could renovate a house that has great potential and turn it into your next dream home.
Check your FHA eligibility. Start here (Dec 4th, 2025)
What is an FHA home improvement loan?
An FHA home improvement loan is an all-in-one purchase and renovation loan insured by the U.S. government. This insurance allows private lenders who are FHA-approved to loan money to buyers who need funds to repair their homes — even without great credit or lots of cash.
Types of FHA home improvement loans
There are two main types of FHA home improvement loans. The best loan option for you will depend on your property, the loan amount, and the type of improvements.
Borrowers looking to purchase a fixer-upper will likely want to use an FHA 203k loan, while borrowers looking to build a swimming pool or make energy efficiency upgrades may opt for other types of home improvement loans.
- FHA 203k loans (for purchase or refinancing) – FHA 203k loans are used for financing the purchase and repairs of primary residences. This loan can be used to purchase or refinance properties that need renovations including single-family or manufactured homes, condominiums, multi-family homes, or mixed-use properties. A Limited 203k loan can be used for less expensive repairs that are not structural, while a Standard 203k loan is for more extensive renovations.
- Title 1 – Available for applicants who typically have a lower or moderate income and do not qualify for a home equity line of credit (HELOC) or home equity loan to obtain the funds for home repairs that are necessary for improving livability.
How do FHA home improvement loans work?
FHA home improvement loans are government-backed loans that enable buyers to affordably improve a home, either a new home they are purchasing or a home they already own.
The big benefit of an FHA 203k loan is that it rolls your purchase and renovation costs into a single low-rate mortgage. That means you only have one loan application, one set of closing costs, and one monthly mortgage payment to worry about.
Without an all-in-one renovation loan, some homeowners would need two separate loans: one mortgage to purchase or refinance their property and a separate loan for home improvements. This can be more costly and time-intensive than combined options like the FHA renovation loan.
The process for FHA home improvement loans is a little more complex than standard FHA loans. That’s because you’ll need to have detailed repair plans and cost estimates that the lender can review before it will approve you for the loan.
Step-by-step guide to getting an FHA home improvement loan
- Find a home that needs some repair and qualifies for an FHA loan
- Locate an FHA-approved lender and apply
- Get bids from qualified contractors
- Appraisal, paperwork, and underwriting are done by lender
- Paperwork is reviewed and accepted, loan gets approved
- Funds for repairs are deposited into a separate escrow account
- Renovations are completed by contractors
- Homeowner officially moves into their newly repaired home
Check your FHA mortgage rates. Start here (Dec 4th, 2025)
FHA home improvement loan limits and requirements 2026
Applicants for the FHA loan programs will need to meet the following requirements in order to complete their home purchase and/or renovations:
Limited 203K FHA loan
- Loan amounts: Can be up to $35,000
- Types of repairs: Repairs and renovations that improve the liveability of the home, as long as they aren’t structural
- Habitability: Property must be habitable during renovation
- Timeline: Sixty days to move in
- Payments: Half (50%) upfront and other 50% after project completion
- Other Conditions: Loans can be either fixed or adjustable-rate mortgages. No reserves needed or U.S. Department of Housing and Urban Development (HUD) consultant required. Inspection of repairs not needed if the repair is under $15,000.
Standard 203K FHA loan
- Loan amounts: $5,000 (minimum) with 110% of after-repair value for maximum loan
- Types of repairs: Any repairs (including structural) with emphasis on health and safety
- Habitability: During renovations, the property does not have to be habitable, mortgage payments can financed up to six months in order to live off-site
- Timeline: Six months to move in
- Payments: Processed by HUD consultant
- Other Conditions: Loans can be either fixed or adjustable-rate mortgages. Reserves and HUD consultant required. Home inspection and additional fees are also generally required.
Title 1 FHA loan
- Maximum loan amount: $7,500 (minimum – no collateral), $25,000 (maximum for one unit such as a single-family home) and usually requires the property to be collateral
- Types of repairs: repairs that are necessary for improved livability, not cosmetic
- Occupancy: Must be an occupant of the home for 90 days prior to loan application
- Payments: Loan term can range from six months to 20 years
- Other Conditions: Loans must be fixed-rate only. No appraisal or housing counseling is required.
Other loan options for home improvement
An FHA home improvement loan can be a great option for borrowers with lower credit scores and/or smaller down payments. The FHA’s lenient requirements make home renovations more accessible for buyers without a lot of cash in the bank. But keep in mind that all FHA loans, including home improvement loans, require mortgage insurance premiums (MIP). This will add to your monthly mortgage cost.
Because of the FHA’s MIP requirement, buyers who can qualify for a different type of home improvement loan might want to explore additional options.
Other options for financing home improvements can include:
- Home equity loan
- Home equity line of credit (HELOC)
- Cash-out refinance
- Personal loan
- Credit cards
Each funding option will have unique advantages and drawbacks, along with its own credit score requirements, interest rates, and loan terms. For example, a second mortgage, including a home equity loan or HELOC, is likely to offer better rates than an unsecured loan — but it will likely take longer to get the funds than a personal loan or credit card. Your budget, goals, and the amount of money you need for home improvements will determine the best financing option, and a mortgage loan officer can help you evaluate your options.
Check your FHA eligibility. Start here (Dec 4th, 2025)
FHA home improvement loan FAQ
How do I qualify for an FHA home improvement loan?
Most FHA home improvement loans will require a minimum credit score of 580 in order to buy a house using a 3.5% down payment. Otherwise, a score that falls between 500 – 579 will typically require a 10% down payment. In addition, the total debt-to-income ratio should not be higher than 43%. Borrowers will also be required to pay mortgage insurance and closing costs.
What is an FHA home improvement loan?
An FHA home improvement loan enables buyers to purchase a home that may be less expensive because it needs repairs. It rolls funding for the purchase and for renovations into one loan.
Can veterans get FHA home improvement loans?
Veterans are eligible for a VA Renovation Loan, which can be used to finance home improvements.
Can an FHA loan be used for renovations?
The FHA 203k loan is used for purchasing a house that doesn’t need renovation, allowing for a lower down payment and easier credit requirements that make the home more affordable.
What is an FHA 203k rehab loan?
The 203k loan is a property improvement loan, specifically designed to renovate homes that need at least $5,000 of home improvement projects.
What repairs can I get with an FHA loan?
Most repairs will either fix the structure of the home or essential features of the home, such as the roof, flooring, plumbing, or heating. Luxury repairs — like installing an outdoor fireplace or a swimming pool — are typically not allowed with an FHA loan.
What credit score is needed for a home improvement loan?
A minimum credit score of 500 is usually required for an FHA home improvement loan but it will ultimately be determined by the lender. Most lenders require a score of 580 in order to accept a 3.5% down payment. Otherwise, for scores between 500 – 579 the down payment will increase to 10%.
How can I get a home improvement loan?
The first step is to find a lender that has experience with FHA 203k loans. After choosing your lender, you’ll have to complete the application process and wait to see if you’re approved.
How do home improvement loans work?
Each 203k loan combines the cost of purchasing the home along with funds that are set aside in an escrow account in order to make needed repairs that are completed by a qualified contractor.
What type of loan is best for home improvements?
The FHA offers a variety of loan options for home improvements. Whether you get a Limited 203k, Standard 203k, or Title 1 loan will depend upon the amount of money you need for your home, whether the repairs will be structural, and how they improve livability. For example, the best loan option might differ if you’re making repairs to the home’s foundation.
How can I finance a home renovation without equity?
Most homes that need extensive repairs won’t have equity until those renovations are done. No equity is required to apply for a 203k or Title 1 loan and value will be assessed both prior and after the repairs are completed.
Check your FHA mortgage rates. Start here (Dec 4th, 2025)
